The US Consumer Financial Protection Bureau (CFPB) has approved a new rule that aims to govern the use of complex algorithms and artificial intelligence (AI) in automated home appraisals. The rule specifically targets automated valuation models (AVMs) and imposes stricter quality control standards for their use. The CFPB expressed concern that the use of AI in appraisals could impact the equitable application of home appraisals. The rule requires institutions to adopt policies, practices, procedures, and control systems to ensure that AVMs used in credit decisions or securitization determinations adhere to quality control standards. The rule also requires institutions to protect against data manipulation, avoid conflicts of interest, conduct random sample testing and reviews, and comply with applicable nondiscrimination laws. Other agencies involved in drafting the rule include the Federal Deposit Insurance Corp. (FDIC), the National Credit Union Administration (NCUA), and the Federal Housing Finance Agency (FHFA) [276d8fcd].
The CFPB's new rule on AI use in automated home appraisals reflects its commitment to ensuring fairness and accuracy in the appraisal process. By imposing stricter quality control standards, the CFPB aims to address concerns about the potential impact of AI on the equitable application of home appraisals. The rule requires institutions to have robust policies and procedures in place to ensure that AVMs used in credit decisions or securitization determinations meet the necessary quality control standards. It also emphasizes the importance of protecting against data manipulation, avoiding conflicts of interest, conducting random sample testing and reviews, and complying with nondiscrimination laws. The involvement of other agencies in the rulemaking process highlights the collaborative effort to establish comprehensive regulations in this area [276d8fcd].
The CFPB's rulemaking on AI use in automated home appraisals is part of its broader mission to protect consumers and promote fair practices in the financial industry. By addressing the potential risks and challenges associated with the use of AI in appraisals, the CFPB aims to ensure that consumers are treated fairly and that the appraisal process remains accurate and reliable. The rule's focus on quality control standards and the prevention of data manipulation and conflicts of interest demonstrates the CFPB's commitment to maintaining the integrity of the appraisal process and upholding consumer trust [276d8fcd].